When clients ask me, “What accounting
system do you recommend?” two words immediately come to mind – “It depends.” I
say this for three reasons. First, there are various types of accounting systems on the market.
There are manual systems, computerized systems, single-entry systems, and double-entry systems. Second, the predisposition of individuals is a major factor. For
instance, some people love working with the computer. Other people can barely
get by. Some people hate working with numbers, others love it. Some people
simply don’t have the time and have to pay someone else to perform accounting
tasks. Third, the
level of activity of the business may be quite small or quite large and this is
another major factor to consider.
Let’s explore
each reason:
Regarding the first reason, if you are
keeping the books for a very small organization, a single-entry system may
suffice. You can find the “Dome” and “Ideal” bookkeeping systems at your local
office store. Personally, I have tried both systems for small businesses and
have found them confusing. The reason
For the confusion is that there are no
checks and balances to catch mistakes.
Although, a double-entry system is
harder to learn it is much easier for maintaining accuracy. Not so many years ago,
accountants used manual systems to record transactions. They had big, hardbound
covers with yellow “Wilmer” ledger pages. I was still using those back in 1978.
What a relief when desktop computers came along! However, there are some manual
systems in use today that are still very effective. These are the “one-write”
systems. Safeguard Business Systems, Inc. is the grand daddy of the one-write
systems and my choice because the layout of their forms makes sense and is easy
to use. A one-write system is sometimes called “checks on a shingle” because
the checks are stacked like shingles on a journal page. The checks have a
carbon strip on the back where the date, payee, purpose, check number, etc., is
automatically recorded on the journal when the check is written. The journal
also has a column for recording bank deposits. In the center of the journal is
a column for a running checkbook balance.
The beauty of this system, and why it
remains popular, is that you don’t need to know accounting to record all the
pertinent information that will be required by your accountant. The journals
can be stored month by month and, if you don’t need a financial statement but
once a year, all the required information is already recorded and organized.
Think about it. You have to write the checks anyway. Isn’t it nice that you
only have to write the information one time? Small business accounting software
programs such as People’s Choice, QuickBooks, Peachtree, MAS90, One-Write Plus,
etc., are absolutely necessary because they are general ledger double-entry
systems that produce financial statements, namely, a balance sheet and profit
& loss statement.
It is hard to get along without them
because they are such a time saver. The question is, “Which one fits you the
best?” This leads us to the second reason.
What are your personal predispositions?
Are you computer literate? Do you have the time or staff to enter all the
transactions into the computer on a timely basis? Is it convenient for you to
cut a computer check on the fly? Will your business stay at the same address
long enough to use all those pre-printed
Computer checks. Do you want to carry a
checkbook with you when running errands and making business purchases? These
are the factors to consider when deciding whether to have computerized checks
or manual checks.
You know you have to have a computer and
an accounting software program. That’s a given. There are various check writing
systems, from your standard little checks you get when you open your bank
account, to the “Thereon-a-Page” checks with stubs, to single checks with a
voucher attached, to the one-write systems. You can, and many people do, use a
manual check writing system in combination with an accounting software package.
The checks are manually entered into the computer from the check register and
coded to the appropriate general ledger account. The remaining information can
be recorded into the computer using the general journal. You can do this
yourself, if you know how and have the time. Or, you can hire someone to do it.
It depends on your preference and your financial resources.
The third reason to consider is the size
of your business. I’m not referring to large businesses because they have to be
computerized and have their own accounting staff. I’m discussing small business
applications here. If you are just getting started and the business is very
small and you can’t afford a computer then I recommend the one-write system.
When you can afford to buy a computer and an accounting software system, you
will want to consider one of the lower priced accounting software systems that
cost in the neighborhood of $200.
When selecting a system, you will want
to ask whether the accounting package can handle your accounting needs as you
expand your business. For instance: after the basic package, can you add on Job
Costing, Payroll, Accounts Payable, Accounts Receivable, Inventory Management,
Cash Flow reporting,
etc.?
Most of the packages have all these modules and more. Therein lays the difficulty.
The complexity of these systems makes it hard for the beginner to begin. The
software manufacturers all claim their systems are simple and easy to learn.
This doesn’t always turn out to be true. I recommend that you start out with
the essentials and, as your knowledge base increases, add more complexity. Next >>